Global indices surge to all-time highs while oil continues to trade higher, questioning the ‘temporary’ nature of inflation concerns.

Comment from David Jones, Chief Market Strategist at European investment trading platform, Capital.com

Although June finished off calmer than some of the market excitement in the middle of the month may have led us to expect, inflation was still a nagging concern for investors. Central bankers have continued to try and soothe any worries about the rise in the cost of living. The Bank of England governor, Andrew Bailey, is the latest, saying that any acceleration in inflation this year would likely be temporary and was just a short-term fallout from the Covid bounce-back.  It remains to be seen how temporary it ends up being, but it’s fair to say that markets shrugged off the mid-June wobble and it was seemingly business as usual.

In the US, the broad-based S&P500 and tech-biased NASDAQ indices pushed to fresh all-time highs as the month finished. The S&P is now up a staggering 95% since the March 2020 low.  It is said that bull markets climb a wall of worry, but at the moment investors seem happy to keep buying the dips, pushing stocks out to ever-dizzying heights.

Perhaps of more concern is the direction of the crude oil market. This week, we saw another multi-year high for crude, hitting its best levels since October 2018.  If we see ongoing strength in oil, this is one thing that could keep the rise in inflation anything but temporary and may give central bankers a real headache in the second half of this year.

Meanwhile, the news from Gap that it was closing its UK and Ireland stores was not a major surprise, and in early trade, the shares were up slightly.  The company’s stock recently hit its best levels in more than five years, so this critical overhaul of its business seems to be well received so far, by investors at least – but it does suggest that they won’t be the last high street big name to undertake such a shake-up.